U.S., Canada make late-night push for NAFTA; no deal yet

WASHINGTON (Reuters) - Top NAFTA negotiators from Canada and the United States wrapped up a third day of two-way talks on Thursday, agreeing to meet the next day to resolve final differences before a deadline, with Mexican counterparts on standby to rejoin negotiations.

FILE PHOTO: Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan, U.S. August 29, 2018. REUTERS/Rebecca Cook

Despite some contentious issues still on the table, the increasingly positive tone contrasted with U.S. President Donald Trump’s harsh criticism of Canada in recent weeks, raising hopes the year-long talks to revamp the North American Free Trade Agreement (NAFTA) will conclude soon with a trilateral deal.

“Canada’s going to make a deal at some point. It may be by Friday or it may be within a period of time,” U.S. President Donald Trump told Bloomberg Television. “I think we’re close to a deal.”

Negotiations entered a crucial phase this week after the United States and Mexico announced a two-way deal on Monday, setting auto content rules and paving the way for Canada to rejoin talks to modernize the 1994 accord that underpins annual trade of more than $1 trillion.

Three-way talks were already underway at the technical level and Mexican Economy Minister Ildefonso Guajardo was expected to soon rejoin talks with U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland, people familiar with the process said.

There was no deal yet, said Freeland, who briefed reporters at the end of Thursday’s talks. “I had a brief conversation with Ambassador Lighthizer and his team. I had a couple of things to say and we’ll reconvene in the morning.”

Earlier Freeland said she had a “long, intensive conversation” with Lighthizer.

Financial markets in U.S., Canada and Mexico have broadly risen this week on expectations of a new NAFTA deal.

The NAFTA deal taking shape is likely to strengthen North America as a manufacturing base by making it more costly for automakers to import a large share of vehicle parts from outside.

The automotive content provisions, the most contentious, could speed a shift of parts-making away from China.

A new chapter governing the digital economy, along with stronger intellectual property, labor and environmental standards could also benefit U.S. companies, helping Trump fulfill his campaign promise of more American jobs.

Trump has set a Friday deadline for an agreement by the three countries, which would allow Mexican President Enrique Pena Nieto to sign it before he leaves office at the end of November. U.S. law requires Trump to wait 90 days to sign.

The U.S. president has warned he could try to proceed with a deal with Mexico alone and levy tariffs on Canadian-made cars if Ottawa does not come on board, although U.S. lawmakers have said ratifying a bilateral deal would not be easy.

DAIRY, DISPUTE SETTLEMENT

Jim Carr, Canada’s minister for international trade diversification, who is not directly involved in the NAFTA talks, said there were risks to all if a deal were not reached because the economies have been dependent on one another for so long.

“There is a risk for everybody, and I think all the nations are aware of that, and that’s why we’re working literally around the clock to do whatever is possible to get the right deal, not any deal, but the right deal for all three countries,” Carr told Reuters in Singapore on the sidelines of a regional conference.

One sticking point for Canada is the U.S. effort to dump the Chapter 19 dispute-resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism.

Trump also wants a NAFTA deal that scraps dairy tariffs of up to 300 percent he argues are hurting U.S. farmers, an important political base for Republicans.

But any concession to Washington by Ottawa is likely to upset Canadian dairy farmers, who wield outsized influence in politics, with concentrations in the provinces of Ontario and Quebec.

“Ultimately, we’ve got huge issues that are still to be resolved,” said Jerry Dias, head of Canada’s influential Unifor labor union. “Either we’re going to be trading partners or we’re going to fight.”

Reporting by Julie Gordon and Sharay Angulo; Additional reporting by Jack Kim in SINGAPORE; Writing by Denny Thomas and David Lawder; Editing by Lisa Shumaker and Clarence Fernandez